CHAPTER 5CHAPTER 5ENVIRONMENTAL FORCESENVIRONMENTAL FORCES

ENVIRONMENTAL FORCES

• Demographic

• Economic

• Political

• Cultural

• Technology

DEMOGRAPHIC ENVIRONMENT

• Population

• Cohort Groups

• Family Structures

POPULATION TRENDS

• U.S. Population

• State Population

• Age Population

• Rural/Urban Population

U.S. POPULATION ESTIMATES

Category 2000 2050 White 69% 50% Hispanic 13% 25% Asian-American 4% 8% Black 13% 15% Other 1% 2% 100% 100%

STATE POPULATION CHANGE 2000 - 2010

AGE POPULATION GROWTH RATE2000 - 2010

Age Group % Growth Rate

5 - 17 + 8

18 - 24 + 8

25 - 44 + 3

45 - 64 +35

65+ +56

RURAL/URBAN POPULATION

Area 1960 2000Cities 32% 30%

Suburbs 31% 50%

Rural 37% 20%

% OF US POPULATION LIVING ON FARMS

1900 39%

2010 2%

HOUSTON CITY REDEVELOPMENTS

• Montrose

• Galleria

• Heights

• Mid-Town

MAJOR HOUSTON SUBURBS

• Woodlands• Kingwood• Katy• Pearland• Sugarland

COHORT GROUPS

• Baby Boomers 1946 – 1964

• Generation X 1965 – 1979

• Generation Y 1980 – 1995

• Generation Z After 1995

BABY BOOMERS

• Employment is for life

• Job status is important

• Many workaholics

GENERATION X

• Latchkey kids era

• Less interested in status symbols

• Lack of company loyalty

GENERATION Y

• Comfortable with diverse ethic groups

• Not very brand loyal

• Little company loyalty

GENERATION Z

• Want instant action and satisfaction

• Communicate through social media

• Always had iPads and smart phones

SUPPORT FOR SAME SEX MARRIAGE

Category 2003 2013

Baby Boomers 33% 38%

Gen X 41% 49%

Gen Y 51% 70%

FAMILY STRUCTURES

• Traditional Family Household

• Married Couples Working

• Married and Unmarried Households

TRADITIONAL FAMILY HOUSEHOLDS

• Working Father • Stay-at-home Mother• School-age Children % of Households 1950 70% 2010 5%

MARRIED COUPLES WORKING

Year Single Earner Multiple Earners

1960 68% 32%

2000 34% 66%

MARRIED AND UNMARRIED HOUSEHOLDS

• Average age of first marriage

• Changes in marriages

• Diversity of unmarried households

AVERAGE AGE OF FIRST MARRIAGE

Sex 1960 2010

Female 22 28

Male 24 30

CHANGES IN MARRIAGES

Category 1960 2010

Adults Married 72% 52%

Adults Divorced 5% 14%

High School or Less Married 72% 48%

DIVERSITY OF UNMARRIED HOUSEHOLDS

• Cohabitation

• Longer Life Spans

• Increased Divorces

ECONOMIC ENVIRONMENT

• Two Important Economists

• Role of Competition

• Major Anti-Trust Laws

• Creative Destruction

TWO IMPORTANT ECONOMISTS

• Adam Smith

• Joseph Schumpeter

ADAM SMITH

• Self-interest of sellers will lead to the greatest economic wealth.

• Competition keeps sellers from making excessive profits.

ROLE OF COMPETITION

• Government Viewpoint:Maintain a healthy, competitive economic system

• Seller Viewpoint:Achieve a sustainable competitive advantage

• Buyer Viewpoint:Wants perceived value for their money

MAJOR COMPETITION

• Direct Rivalry Kroger vs. HEB

• Buyers McDonald’s vs. Bakery

• Suppliers Randalls Cola vs. Coca Cola

• New Entrants Google vs. Apple

DIRECT RIVALRY COMPETITIONIN 2014

• Apple

• Google

• Facebook

• Amazon

MAJOR ANTI-TRUST LAWS

Sherman Act - 1890• Monopoly is illegal• Restraint of trade is illegal

Clayton Act - 1914• Predatory pricing and tying agreements are illegal

if they substantially reduce competition

CLAYTON ACT - 1914Various activities are illegal if they substantially reduce competition

• predatory pricing

• tying agreements

• exclusive dealings

• merge companies

ANTI-TRUST ACTIVITY EXAMPLES

• Beer industry

• Airlines

• Facebook

• E-Book pricing

JOSEPH SCHUMPETER

• Innovative and creative products will destroy or replace many existing products.

• This economic process is called “creative destruction”.

CREATIVE DESTRUCTION MANAGERS

• Jeff Bezos

• Sergey Brin & Larry Page

• Steve Jobs

• Mark Zuckerberg

CREATIVE DESTRUCTION PROCESSES

• On-line retailing

• On-line services

• Cloud computing

CREATIVE DESTRUCTION EXAMPLES

• Kodak

• Post Office

• Polaroid

POLITICAL ENVIRONMENT

• Political Levels

• Political Conflicts

• Political Consequences

POLITICAL LEVEL

• Local

• State

• Federal

• International

LOCAL POLITICAL ENVIRONMENT

• Health Department Regulations

• City Zoning Laws

• NIMBY Concept

NIMBY EXAMPLES

• Houston garbage in Ford Bend

• Zoning regulation in Houston

• Keeping Walmart out of a Houston Heights

STATE POLITICAL ENVIRONMENT

• Licensing for Professional Services

• State Automobile Laws

• Triple Distribution for Beer and Liquor

AUTOMOBILE LAWS IN TEXAS

• New cars cannot be sold directly over the internet in Texas

• GM cannot sell a new car directly in Texas

• No new cars can be sold in Texas on Sunday

FEDERAL POLITICAL ENVIRONMENT

• Federal Drug Administration

• Federal Reserve Board

• Federal Trade Commission

INTERNATIONAL POLITICAL ENVIRONMENT

• Tariff Restrictions

• NAFTA

• International Treaties

POLITICAL CONFLICTS

• Business vs. Government

• Business vs. Business

• Business vs. Consumers

• Federal Government vs. State Government

BUSINESS VS. GOVERNMENT

• FTC regulates false and misleading advertising

• OSHA, EPA, and the FDA are charged with regulating health and safety areas

• Federal Reserve Board makes monetary and fiscal policy decisions

BUSINESS VS. BUSINESS

• Sunday Blue Laws - many retail goods could not be sold on both Saturday and Sunday

• Banking, Insurance, and Brokerage firms could not own each other

• Out-of-State Wine Shipping Laws

BUSINESS VS. CONSUMERS

• A home buyer has 72 hours to reject a sale made in the home

• A law requires banks to clear consumer checks within a number of days

• A law requires credit card companies to give credit to women under similar conditions as men

FEDERAL GOVERNMENT VS. STATE GOVERNMENT

• State Internet Sales Taxes

• Medicare Payments

• Education Grants

POLITICAL CONSEQUENCES

• Statutory law

• Administrative law

• Court rulings

• Unintended consequences

PROCESS TO CHALLENGE AN UNDESIRABLE LAW

Lobby to defeat new law

Minimize effect of law

Challenge legality of law

Look for unintended consequences

UNINTENDED CONSEQUENCES OF LAWS

• Impact, Texas

• Hummer automobile

• Ethanol

CULTURAL ENVIRONMENT

• Changing American Values

• International Cultural Values

CHANGING AMERICAN VALUES

Older Values Newer Values

Live to Work Work to Live

Let the Buyer Beware Let the Seller Beware

Single-Wage Earner Multi-Wage Earners

INTERNATIONAL CULTURE VALUES

• Time

• Space

• New Year Celebrations

• Cultural Differences

CULTURAL VALUE OF TIME

• Mexico

• Indonesia

• Belize

CULTURAL VALUE OF SPACE

• Business cocktail events

• Lining up at airports

• Location and status of office

NEW YEAR CELEBRATIONS

• United States

• Vietnam

• Egypt

CULTURAL DIFFERENCES

Concept U.S. Culture Other Cultures

Time 1-12am 1:00-24:00 1-12pm

Measurement Feet Meters

Temperature Fahrenheit Centigrade

TECHNOLOGY ENVIRONMENT

• Nanotechnology

• Cloud Computing

• Energy Technology

NANOTECH EXAMPLES

• Cancer treatments

• Nano computer

• Purified drinking water

CLOUD COMPUTING EXAMPLES

• Rackspace

• Salesforce.com

• Dropbox

ENERGY TECHNOLOGY EXAMPLES

• Space-based solar power

• Battery storage

• Shale gas